SBI issues Rs,10,000 crore in 15-year Infrastructure Bonds at 7.36% Coupon rate

State Bank of India (SBI), the country’s largest lender, announced on Wednesday that it has raised Rs.10,000 crore through 15-year infrastructure bonds with a 7.36% coupon rate. This issuance is SBI's sixth infrastructure bond offering in the past few months, bringing the total outstanding long-term bonds to Rs.59,718 crore.

The issue drew bids exceeding Rs 18,145 crore and was oversubscribed by approximately 3.6 times the base issue size of Rs 5,000 crore. The bank noted that it received around 120 bids from various investors, including provident funds, pension funds, insurance companies, mutual funds, and corporate entities.

Chairman of SBI Dinesh Khara told media that the issuance will help develop a long-term bond curve and encourage other banks to issue bonds with longer tenors.

Money raised through infrastructure bonds benefits banks as it is exempt from regulatory reserve requirements like the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

Unlike funds raised through deposits, which require banks to maintain 4.5% as CRR with the Reserve Bank of India (RBI) and invest around 18% in securities to meet SLR obligations, proceeds from infrastructure bonds can be fully used for lending activities.

Other state-owned lenders, including Canara Bank and Bank of India, are also planning to raise funds through infrastructure bonds.

Meanwhile, state-run lender Bank of Baroda (BoB) is planning to raise funds through a USD issuance. BoB will issue $500 million in standalone “REG S” bonds under its $4 billion Medium Term Notes (MTN) program and has invited applications for joint lead managers for this international USD bond issuance.

Earlier in January, SBI raised $600 million by issuing a five-year bond to a global group of investors as part of its $10 billion medium-term note program. Following this, several Non-Banking Finance Companies (NBFCs), including Shriram Finance, Muthoot Finance, Manappuram Finance, and Sammaan Capital (formerly Indiabulls Housing Finance), raised funds through USD bonds.